Monetary Policy – Is Divergence Really Against the Greenback?
Economic data released through the Asian session this morning delivered some unexpected results.
New Zealand saw softer inflation in the 1st quarter, in spite of a new sales tax on cigarette and tobacco. Economic data out of China was not quite as bad as many had anticipated, in spite of the trade war…
Economic data out of the U.S hasn’t been great, but there’s a high bar set by the markets. Labour market conditions remain strong and, when considering consumption contribution to the GDP numbers, this is key.
The bad news for Trump would be the rising prospects of a rate hike. We’ve yet to see any particularly alarming stats out of the U.S, to support a rate cut.
All in all, the Greenback continues to move on the assumption of a continued pause through the year. In spite of this, divergence remains clearly in favor of the Dollar.
Will EURUSD Break Out Above 1.1300?
The EURUSD retreated off the highs after briefly testing the 1.1300 handle. The retracement saw price falling back to 1.1258. With support forming here, a rebound in the EURUSD is likely. The next main target is at the 1.1330 handle. If the common currency manages to break this level, we anticipate a move toward 1.1400.
Long position above 1.1280 with target 1.1345 & 1.1400 in extension
Below 1.1280 with target 1.1240 $1.1180.
Will XAUUSD Rebound to the Upside?
The declines in the XAUUSD saw the price of the precious metal falling to the 200-day moving average on a daily basis. Price posted a modest pullback following this decline. We expect the bearish momentum to slow as a result. A pullback is quite possible in gold prices with the recently breached support of 1285 likely to serve as resistance.
Long position above 1275 with target 1285 & 1290 in extension
Below 1275 with target 1265.
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